Treasury Issues Official Guidance on Extension of Time to Pay Taxes
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The Treasury’s announcement on March 17, 2020 that the April 15 tax payment deadline was going to be extended without penalties and interest was welcome news for certain taxpayers. However, the announcement left out important specifics on the scope of the relief and how it would be implemented. Moreover, while positive, the announcement was not official guidance, although sources reported that the Treasury was relying on the IRS’s administrative authority to act under President Trump’s national-emergency declaration.
IRS Notice 2020-17
On March 18, 2020, the IRS swiftly followed through and issued official guidance to taxpayers through Notice 2020-17. An IRS notice is a public pronouncement that contains guidance concerning substantive interpretations of the Internal Revenue Code or other provisions of the law. For example, notices can be used to communicate what regulations will say in circumstances where the regulations may not be published in the immediate future.
IRS Notice 2020-17 Confirms
IRS Notice 2020-17 publicly confirms that income tax payments for individual taxpayers (either filing single or married filing jointly) who owe $1 million or less and consolidated group entities or corporations that owe $10 million or less, can be postponed to July 15, 2020 without incurring a failure to pay penalty. Importantly, consistent with Treasury’s March 17, 2020 announcement, there is no default extension for filing the actual applicable tax return. Therefore, taxpayers should continue plans to work with their tax advisors and preparers to complete required tax filings by the regular due date or affirmatively request an extension by filing the applicable automatic extension form. This is an affirmative tax compliance exercise that may get missed due to a misinterpretation of Treasury’s March 17, 2020 announcement.
IRS Notice 2020-17 Unanswered Questions
There are still unanswered questions on IRS Notice 2020-17. For example, it is not clear whether the extension of payment applies to tax reported on federal fiduciary income tax returns or transfer tax returns, although the general consensus in the tax professional community is that it does not. It is also not clear how the extension will apply to estimated tax payments. Finally, there are additional details needed to properly implement the extension relief.
Miller Johnson is actively communicating with the accounting sector and will provide an update as developments occur.
The text of Notice 2020-17 can be found at https://www.irs.gov/pub/irs-drop/n-20-17.pdf